Monday, 11 April 2011 15:59
QUOTE OF THE WEEK..."Whether you think you can or think you can't--you are right."--Henry Ford
INFO THAT HITS US WHERE WE LIVE...Those of us who think we can participate in a housing market recovery sooner rather than later just got welcome support from some industry experts. As reported by Fortune on CNNMoney.com, "After four years of plunging home prices, the most attractive asset class in America is housing." Research firm Metrostudy, which tracks new-home inventories for 65% of the U.S. market, reports that the steep drop in construction over the last few years has reversed the supply glut, with starts now well below closings. The firm believes the low inventory should eventually lead to higher prices.
The Fortune posting also cited a new study from a major bank that found homeowners now pay only 9.8% of their income in after-tax mortgage, tax and insurance payments, down from 17.2% at the 2007 peak. This means it's now cheaper to pay a mortgage and the other major homeowner costs than it is to rent the same house in 28 out of 54 major markets.
Fortune further reports that where existing home inventories average close to seven months, a modest boost in demand will result in solid gains in home prices and new construction. This could happen quickly in markets now showing good job growth. Moody's Analytics forecasts prices going up three to four points faster than inflation over the next few years in virtually all such markets. They see home prices rising with rents, with apartments in short supply. Of course, the housing recovery still requires job creation and consumer confidence back to normal, but we finally seem headed in that direction.
BUSINESS TIP OF THE WEEK...Avoid the hard sell--a soft sell approach is actually far more effective. Satisfy your customers' needs and wants. Discover their pain points and be their problem solver. Do what really is best for your customer and see your reputation and business grow.
>> Review of Last Week
WALL STREET FLAT, WASHINGTON STAYS OPEN...Our representatives in Washington waited until the last minute to agree on budget cuts and avoid the first Federal government shutdown in 15 years. The media had a field day, but investors largely ignored it, understanding that the last thing any government wants to do is put a stop to its own operations. But there was enough other bothersome news--rising gold and oil prices, a declining dollar and a rate hike by the European Central Bank--to leave the Dow flat and the other two major stock indexes off a tick for the week.
But the ISM Non-Manufacturing index, which dipped slightly in March, still shows the services sector above 50 and growing. In fact, this index has been in that territory now for 16 straight months! It was also encouraging that initial weekly jobless claims dropped again, staying well below 400,000, which economists say stabilizes the unemployment rate, now under 9%, two months in a row. The minutes from the Fed's March 15 meeting reported "the pace of economic activity...a little slower," but "the labor market continued to show signs of firming," which is key to the housing recovery.
For the week, the Dow ended flat, at 12,380; the S&P 500 was off 0.3%, to 1,328; and the Nasdaq was also off 0.3%, ending at 2,780.
There wasn't much economic or auction news to bolster the bond market. Not even Portugal's bailout request could motivate a flight to safety to help bond prices. Consequently, the FNMA 4.0% bond we watch ended the week down .91, closing at $97.19. Reflecting this, national average rates for conforming mortgages drifted up in Freddie Mac's weekly survey, but rates are still historically low. Even better, demand for purchase loans hit its highest level of the year at the end of March.
DID YOU KNOW?...The Commerce Department reported the average price of a new home sold in December was the highest it's been since July 2008--$291,400.
>> This Week’s Forecast
HOW MUCH ARE WE BUYING, WHAT ARE WE PAYING AND HOW'S BUSINESS?... Wednesday's March Retail Sales are expected to show we consumers continue to buy more. We're also paying more, as the Consumer Price Index (CPI) is forecast up a tad. But Core CPI is what the Fed focuses on, which excludes volatile food and energy prices. Some economists think food and energy hikes are exactly why the Fed should begin raising rates. Wholesale inflation is also moving up, measured by the Producer Price Index (PPI), and some experts say businesses will eventually pass these higher prices on to the consumer. Yet Michigan Consumer Sentiment is predicted to remain fairly positive.
How business is doing will be reflected in the Trade Balance, expected to show a $45 billion export-import gap, and the Empire State Manufacturing Index, forecast to report continued growth in the New York region. So the recovery inches up, a good thing for all.